assam tea Ltd. decied to forfeit 1,000 shares of ₹20/- each for non-payment of allotment money of ₹5/- each and 1st and final call money of ₹2/- each. Give Journal entry for the forfeiture of shares
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assam tea Ltd. decied to forfeit 1,000 shares of ₹20/- each for non-payment of allotment money of ₹5/- each and 1st and final call money of ₹2/- each. Give Journal entry for the forfeiture of shares
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Answer:
When Assam Tea Ltd. decides to forfeit 1,000 shares of ₹20/- each for non-payment of allotment money of ₹5/- each and 1st and final call money of ₹2/- each, you would make the following journal entry:
1. To record the forfeiture of shares:
Share Capital Account (₹20 each) Dr. 20,000
(Being 1,000 shares forfeited at ₹20 each)
2. To reverse the allotment money previously credited:
Allotment Account Dr. 5,000
(Being allotment money on forfeited shares reversed)
3. To reverse the 1st and final call money previously credited:
Call Account Dr. 2,000
(Being 1st and final call money on forfeited shares reversed)
4. To record the forfeiture of shares by the member:
Forfeited Shares Account Dr. 27,000
(Being shares forfeited by the member)
5. To transfer the amount to Capital Reserve (if any) or General Reserve:
Capital Reserve or General Reserve Account Dr. 27,000
(Being the amount transferred to Capital Reserve or General Reserve)
These entries account for the forfeiture of shares and the reversal of the allotment and call money, with any excess amount being transferred to a reserve account as per the company's policy.
Explanation:
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